INDEPENDENT BANK CORPORATION 
By
-- 2009 first quarter net loss applicable to common stock of $19.7 million
($0.84 per share), with these results impacted by:
-- A provision for loan losses of $30.8 million
-- Loan and collection costs of $4.0 million
-- Loss on other real estate and repossessed assets of $1.3 million
-- Pre-tax, pre-provision core operating earnings remain strong and
improved in 2009 over 2008
-- Net interest margin grew to 5.13%, which is among the best in the
banking industry
-- Company remains "well capitalized" for regulatory purposes
Independent Bank Corporation (Nasdaq: IBCP) reported a first quarter 2009 net loss applicable to common stock of
Operating Results
The Company's tax equivalent net interest income totaled
Service charges on deposits totaled
Securities losses totaled
Gains on the sale of mortgage loans were
Mortgage loan servicing generated a loss of
Non-interest expenses totaled
Compensation and employee benefit costs declined by
Income tax expense for the first quarter of 2009 was
Pre-Tax, Pre-Provision Core Operating Earnings
The Company is presenting pre-tax pre-provision core operating earnings in this release for purposes of additional analysis of operating results. Pre-tax pre-provision core operating earnings, as defined by management, represents the Company's income (loss) excluding: income tax expense (benefit), the provision for loan losses, securities gains or losses, and any impairment charges (including goodwill, losses on other real estate or repossessed assets and fair-value adjustments) or elevated loan and collection costs caused by this economic cycle.
The following table reconciles pre-tax pre-provision core operating earnings to consolidated net income (loss) presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Pre-tax, pre-provision core operating earnings is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income (loss) under GAAP. Pre-tax, pre-provision core operating earnings has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. However, the Company believes presenting pre-tax pre-provision core operating earnings provides investors with the ability to gain a further understanding of its underlying operating trends separate from the direct effects of any impairment charges, credit issues, fair value adjustments, securities gains or losses, challenges inherent in the real estate downturn and other economic cycle issues and displays a consistent core operating earnings trend before the impact of these challenges. The credit quality section of this release already isolates the challenges and issues related to the credit quality of the Company's loan portfolio and the impact on its results as reflected in the provision for loan losses.
Pre-Tax, Pre-Provision Core Operating Earnings
Quarter Ended
3/31/09 12/31/08 3/31/08
(in thousands)
Net income (loss) $(18,597) $(90,025) $341
Income tax expense (benefit) 293 10,348 (2,031)
Provision for loan losses 30,838 28,831 11,316
Securities losses 581 6,924 2,163
Impairment charge on capitalized
mortgage loan servicing 697 4,255 725
Impairment charge on goodwill -- 50,020 --
Losses on other real estate and
repossessed assets 1,261 2,258 106
Elevated loan and collection costs (1) 2,788 2,286 675
Pre-Tax, Pre-Provision Core
Operating Earnings $17,861 $14,897 $13,295
(1) Represents the excess amount over a "normalized" level of $1.25
million quarterly.
TARP Capital Purchase Program
On
In the approximately 109-day period (ending
Asset Quality
Commenting on asset quality, CEO Magee added: "Our provision for loan losses remained elevated in the first quarter, primarily reflecting ongoing weakness in loans tied to residential real estate and significant declines in underlying collateral values, which is to be expected given the current challenges in the
A breakdown of non-performing loans by loan type is as follows:
Loan Type 3/31/2009 12/31/2008 3/31/2008
(Dollars in Millions)
Commercial (1) $68.9 $78.1 $72.1
Consumer/installment 6.8 4.9 3.4
Mortgage 50.8 38.9 24.8
Finance receivables 2.5 3.4 1.9
Total $129.0 $125.3 $102.2
Ratio of non-performing loans
to total portfolio loans 5.27% 5.09% 4.06%
Ratio of non-performing assets
to total assets 5.25% 4.91% 3.56%
Ratio of the allowance for loan
losses to non-performing loans 45.18% 46.22% 48.84%
(1) The March 31, 2009 amount includes approximately $10 million of
pending dispositions of non-performing commercial loans that are
expected to close in the second quarter.
The increase in non-performing loans since year-end 2008 is due principally to an increase in non-performing residential mortgage loans that was partially offset by a decline in non-performing commercial real estate loans. The decline in non-performing commercial real estate loans is primarily due to net charge-offs during the first quarter. Non-performing commercial real estate loans largely reflect delinquencies caused by cash flow difficulties encountered by real estate developers in
The provision for loan losses was
Balance Sheet, Liquidity and Capital
Total assets were
Stockholders' equity totaled
Well
3/31/2009 Capitalized
Regulatory (estimate) 12/31/2008 3/31/2008 Minimum
Capital Ratio
Tier 1 capital to
average assets 7.97% 8.61% 7.50% 5.00%
Tier 1 capital to
risk-weighted
assets 9.97% 11.04% 9.49% 6.00%
Total capital to
risk-weighted
assets 12.22% 13.05% 11.17% 10.00%
With regard to the outlook for the remainder 2009, CEO Magee concluded, "The difficult economic conditions of 2008 have continued into 2009 and we would expect these circumstances to persist for several more quarters. With the significant uncertainty surrounding Michigan's economy, we may see further adverse impact on the communities we serve as well as our near-term financial results. Despite these anticipated headwinds, IBC remains well capitalized, and our entire team is focused on strengthening our position for an eventual recovery."
Conference Call
To participate in the live conference call, please dial 1-800-860-2442. The call can also be accessed (listen-only mode) via the Company's Web site at IndependentBank.com in the "Investor Relations" section. A playback of the call can be accessed by dialing 1-877-344-7529 (Replay Passcode # 429150). The replay will be available through
In addition, a Power Point presentation associated with the first quarter 2009 conference call will be available on the Company's Web site at IndependentBank.com in the "Investor Relations" section under the "Presentations" tab beginning on
About Independent Bank Corporation
Independent Bank Corporation (NASDAQ: IBCP) is a
For more information, please visit our Web site at: IndependentBank.com
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "expect," "believe," "intend," "estimate," "project," "may" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are predicated on management's beliefs and assumptions based on information known to Independent Bank Corporation's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Independent Bank Corporation's management for future or past operations, products or services, and forecasts of the Company's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, and estimates of credit quality trends. Such statements reflect the view of Independent Bank Corporation's management as of this date with respect to future events and are not guarantees of future performance, involve assumptions and are subject to substantial risks and uncertainties, such as the changes in Independent Bank Corporation's plans, objectives, expectations and intentions. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, the Company's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in interest rates, changes in the accounting treatment of any particular item, the results of regulatory examinations, changes in industries where the Company has a concentration of loans, changes in the level of fee income, changes in general economic conditions and related credit and market conditions, and the impact of regulatory responses to any of the foregoing. Forward-looking statements speak only as of the date they are made. Independent Bank Corporation does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Independent Bank Corporation claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
March 31, December 31,
2009 2008
(unaudited)
Assets (in thousands)
Cash and due from banks $62,384 $57,705
Trading securities 1,144 1,929
Securities available for sale 213,463 215,412
Federal Home Loan Bank and Federal
Reserve Bank stock, at cost 28,063 28,063
Loans held for sale, carried at fair
value 34,092 27,603
Loans
Commercial 940,418 976,391
Mortgage 816,418 839,496
Installment 335,796 356,806
Finance receivables 354,327 286,836
Total Loans 2,446,959 2,459,529
Allowance for loan losses (58,305) (57,900)
Net Loans 2,388,654 2,401,629
Other real estate and repossessed
assets 26,122 19,998
Property and equipment, net 74,125 73,318
Bank owned life insurance 45,297 44,896
Goodwill 16,734 16,734
Other intangibles 11,689 12,190
Capitalized mortgage loan servicing
rights 11,589 11,966
Accrued income and other assets 39,625 44,802
Total Assets $2,952,981 $2,956,245
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing $305,358 $308,041
Savings and NOW 972,036 907,187
Retail time 649,715 668,968
Brokered time 233,919 182,283
Total Deposits 2,161,028 2,066,479
Federal funds purchased 750
Other borrowings 444,388 541,986
Subordinated debentures 92,888 92,888
Financed premiums payable 40,059 26,636
Accrued expenses and other liabilities 37,182 32,629
Total Liabilities 2,775,545 2,761,368
Shareholders' Equity
Preferred stock, Series A, no par
value, $1,000 liquidation preference
per share - 200,000 shares authorized;
72,000 shares issued and outstanding
at March 31, 2009 and December 31,
2008 68,631 68,456
Common stock, $1.00 par value -
40,000,000 shares authorized; issued
and outstanding: 24,029,942 shares
at March 31, 2009 and 23,013,980
shares at December 31, 2008 23,816 22,791
Capital surplus 201,025 200,687
Retained earnings (accumulated
deficit) (93,761) (73,849)
Accumulated other comprehensive loss (22,275) (23,208)
Total Shareholders' Equity 177,436 194,877
Total Liabilities and
Shareholders' Equity $2,952,981 $2,956,245
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended
March 31, December 31, March 31,
2009 2008 2008
(unaudited)
(in thousands)
Interest Income
Interest and fees on loans $44,401 $45,444 $48,126
Interest on securities
Taxable 1,733 1,909 2,304
Tax-exempt 1,107 1,240 2,247
Other investments 324 99 357
Total Interest Income 47,565 48,692 53,034
Interest Expense
Deposits 8,548 9,717 16,212
Other borrowings 4,670 6,379 6,437
Total Interest Expense 13,218 16,096 22,649
Net Interest Income 34,347 32,596 30,385
Provision for loan losses 30,838 28,831 11,316
Net Interest Income After
Provision for Loan Losses 3,509 3,765 19,069
Non-interest Income
Service charges on deposit accounts 5,507 5,996 5,647
Net gains (losses) on assets
Mortgage loans 3,281 1,204 1,867
Securities (581) (6,924) (2,163)
VISA check card interchange income 1,415 1,394 1,371
Mortgage loan servicing (842) (3,616) (323)
Title insurance fees 609 280 417
Other income 2,189 2,310 2,676
Total Non-interest Income 11,578 644 9,492
Non-interest Expense
Compensation and employee benefits 12,577 13,164 14,184
Loan and collection 4,038 3,536 1,925
Occupancy, net 3,048 3,054 3,114
Data processing 2,096 1,951 1,725
Furniture, fixtures and equipment 1,849 1,770 1,817
Advertising 1,442 1,691 1,100
Loss on other real estate and
repossessed assets 1,261 2,258 106
Goodwill impairment 50,020
Other expenses 7,080 6,642 6,280
Total Non-interest Expense 33,391 84,086 30,251
Loss Before Income Tax (18,304) (79,677) (1,690)
Income tax expense (benefit) 293 10,348 (2,031)
Net Income (Loss) $(18,597) $(90,025) $341
Preferred dividends 1,075 215
Net Income (Loss) Applicable to
Common Stock $(19,672) $(90,240) $341
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data
Three Months Ended
March 31, December 31, March 31,
2009 2008 2008
(unaudited)
Per Common Share Data (A)
Net Income (Loss) Per Common Share
Basic (B) $(.84) $(3.92) $.01
Diluted (C) (.84) (3.92) .01
Cash dividends declared .01 .01 .11
Selected Ratios (annualized) (A)
As a Percent of Average Interest-Earning
Assets
Tax equivalent interest income 7.08% 7.11% 7.37%
Interest expense 1.95 2.31 3.07
Tax equivalent net interest income 5.13 4.80 4.30
Net Income (Loss) to
Average common equity (62.73)% (161.44)% 0.56%
Average assets (2.68) (11.72) 0.04
Average Shares
Basic (B) 23,365,831 23,014,145 22,894,316
Diluted (C) 23,431,882 23,073,827 22,991,625
(A) For the three-month periods ended March 31, 2009 and December 31,
2008, these amounts are calculated using net loss applicable to common
stock.
(B) Average shares of common stock for basic net income per share include
shares issued and outstanding during the period and participating share
awards.
(C) Average shares of common stock for diluted net income per share
include shares to be issued upon exercise of stock options, stock units
for deferred compensation plan for non-employee directors and non-vested
share awards. For any period in which a loss is recorded, the assumed
exercise of stock options, and stock units for deferred compensation plan
for non-employee directors would have an anti-dilutive impact on the loss
per share and thus are ignored in the diluted per share calculation.
SOURCE Independent Bank Corporation
